One thought’s been bouncin’ about my head. I heard a lot of the word “responsibility” in the President’s State of the Union speech Wednesday night. Particularly in his declarations on the responsibilities of Wall Street, banks, and business.
I think this whole concept of responsibility, as the President is voicing it, is flawed. Since I have not heard or read this point analyzed anywhere else, well, here goes:
Banks and businesses are economic entities functioning in the system of free market capitalism. Wall Street is just a collection of such entities.
What is the “responsibility” of such an economic entity?
I’m no economist, but what I have learned and absorbed about the dismal science tells me intuitively that the fundamental responsibility of any economic entity (including such entities as, say, families and the individual) is self-perpetuation.
Survival.
For banks and businesses, survival is found only in profit.
That’s it. Survival measured by profits and profitability is the only code of morality economic entities have. That’s our economic system, for better or worse. Though they are required to operate within a legal framework, our economic entities are not assumed nor required to adhere to any greater morality, whether it’s the Ten Commandments, the Sermon on the Mount, or even the Golden Rule.
Forcing additional “responsibilities” upon these economic entities just doesn’t work. Indeed, it makes absolutely no sense.
For example, take the notion the President spoke about that banks have a responsibility to lend out money to small businesses in need of fundage. What exactly does this mean? They lend when it’s prudent: when they are confident the loan will be repaid and they will make a decent return. Does it mean they must make loans where they won’t make money or even get the principal back?
I don’t know what exactly the President means, but I think that last sentence is what banks think he means. To them, that is contrary to survival. And that’s why they’re white-knuckling on tight to their money, and the economy is stagnating.
If Obama truly wants the economy to turn around, he can’t stand there wielding a big stick, dictating self-contradictory and self-destructive “responsibilities” to various economic institutions. But since he does not believe in any other course of action, as we clearly heard in his SOTU speech, we are in for at least another nine months or so of malaise.
Until November 2, 2010.
Now. If anyone can explain to me – clearly, concisely, logically, as well as economically – how any stated policy of Obama’s can turn the economy around, I would really, truly, love to hear it. Honestly.
Please!
I think this whole concept of responsibility, as the President is voicing it, is flawed. Since I have not heard or read this point analyzed anywhere else, well, here goes:
Banks and businesses are economic entities functioning in the system of free market capitalism. Wall Street is just a collection of such entities.
What is the “responsibility” of such an economic entity?
I’m no economist, but what I have learned and absorbed about the dismal science tells me intuitively that the fundamental responsibility of any economic entity (including such entities as, say, families and the individual) is self-perpetuation.
Survival.
For banks and businesses, survival is found only in profit.
That’s it. Survival measured by profits and profitability is the only code of morality economic entities have. That’s our economic system, for better or worse. Though they are required to operate within a legal framework, our economic entities are not assumed nor required to adhere to any greater morality, whether it’s the Ten Commandments, the Sermon on the Mount, or even the Golden Rule.
Forcing additional “responsibilities” upon these economic entities just doesn’t work. Indeed, it makes absolutely no sense.
For example, take the notion the President spoke about that banks have a responsibility to lend out money to small businesses in need of fundage. What exactly does this mean? They lend when it’s prudent: when they are confident the loan will be repaid and they will make a decent return. Does it mean they must make loans where they won’t make money or even get the principal back?
I don’t know what exactly the President means, but I think that last sentence is what banks think he means. To them, that is contrary to survival. And that’s why they’re white-knuckling on tight to their money, and the economy is stagnating.
If Obama truly wants the economy to turn around, he can’t stand there wielding a big stick, dictating self-contradictory and self-destructive “responsibilities” to various economic institutions. But since he does not believe in any other course of action, as we clearly heard in his SOTU speech, we are in for at least another nine months or so of malaise.
Until November 2, 2010.
Now. If anyone can explain to me – clearly, concisely, logically, as well as economically – how any stated policy of Obama’s can turn the economy around, I would really, truly, love to hear it. Honestly.
Please!
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